As Expected, AST Reports Loss for Year : Earnings: $125-million charge that company took to cover acquisition from Tandy Corp. puts it $53.7 million in the red.
AST Research Inc., as expected, reported a loss for its latest fiscal year as a result of its July acquisition of Tandy Corp.’s computer manufacturing business.
AST, which is Orange County’s biggest computer company, took a $125-million charge against earnings to cover the Tandy purchase, giving it a loss of $53.7 million, or $1.72 a share, for the fiscal year that ended July 3. That contrasted with a profit of $68.5 million, or $2.16 a share, for the previous 12 months.
Annual revenue increased 49% to $1.4 billion from $944.1 million for the previous year.
Safi Qureshey, chief executive, said the company, based in Irvine, met its goals of becoming a high-volume manufacturer of personal computers, maintaining operating profits and expanding market share at a time when other PC makers are suffering losses in one of the most severe price wars in the industry’s history.
Analysts said the loss was expected. AST must reorganize its own operations, they said, and integrate Tandy’s computer manufacturing operations into its own. AST will pay $15 million in cash and as much as $160 million in notes to Tandy, which is based in Fort Worth. Tandy will now focus on its computer stores and other retail operations.
“AST is now one of the top four computer companies, and this market will shrink the middle players out,” said James Stone, analyst at Pennsylvania Merchant Group, an investment bank in Radnor, Pa.
With the Tandy addition, AST Research ranks sixth in global market share and fourth in U.S. share, according to International Data Corp.’s estimates for 1992. AST said it shipped 804,000 computers last year, a 69% increase.
For its fourth fiscal quarter, AST reported a loss of $87 million, or $2.76 a share, contrasted with a profit of $18.6 million, or 59 cents a share, for the same period a year earlier. Three-month revenue was $409.2 million, up 54% from $266.3 million a year earlier. AST shipped a record 241,000 PCs during the fourth quarter of fiscal 1993, a 76% increase over the same period a year earlier.
In Thursday’s NASDAQ trading, AST’s stock fell 50 cents a share to close at $14.875.
Qureshey said that the company’s profit, even before the one-time charge, was lower than Wall Street had expected because the company is discounting older product lines and is making a transition to a new series of products this fall.
“We’ll upgrade our whole product line in the next six months,” he said.
Ian Gilson, analyst at investment bank L.H. Friend, Weinress, Frankson & Co. in Irvine, said he thinks AST will probably regain profitability after digesting the Tandy acquisition.
“I think there is some slack in the write-off,” he said.
Carmelo Santoro, chairman of AST, said that, besides the Tandy acquisition, the company’s major achievement in the past year has been filling a number of spots among the management team under Qureshey.
“For the last year, filling in the boxes to build a strong management team has been a priority,” Santoro said. “We’ve now got to continue to produce operating profits and make the acquisition work.”
Half a dozen executives departed after co-founder Tom Yuen left the company in June, 1992, following a power struggle for control of the company. In the past several months, AST has added several vice presidents in charge of manufacturing, components purchasing and marketing.
“We now have a full deck,” Qureshey said.
The Tandy deal gives AST three computer manufacturing plants in Texas as well as a plant in Scotland.
AST Reports Fiscal-Year Earnings
For its fiscal year ended July 3, AST Research Inc. reported a $53.7-million loss because of the cost of acquiring Tandy Corp.’s PC manufacturing operations. The company, however, reported record yearly and quarterly revenue. Figures in millions of dollars, except data per share:
4th qtr 4th qtr 12 months 12 months 1992 1993 1992 1993 Revenue $266.3 $409.2 $944.1 $1,412.2 Net income (loss) 18.6 (87.0) 68.5 (53.7 ) Per share (loss) 0.59 (2.76) 2.16 (1.72)
Source: AST Research Inc.; Researched by JANICE L. JONES / Los Angeles Times
